Pioneer Corp. said it had secured up to ¥60 billion ($540 million) with a planned share issue to Baring Private Equity Asia — a lifeline after its bet on car navigation systems to survive tumultuous times flopped.
Pioneer’s reliance on car GPS and audio systems has backfired amid fierce competition and higher development costs as automakers demand systems with smartphone connectivity and sophisticated mapping technology needed for self-driving cars.
The deal — potentially worth more than the Japanese firm’s current market value — will see Pioneer issue about ¥50 billion to ¥60 billion worth of stock to the Hong Kong-based fund by the end of December.
“It is likely that Baring will become the top shareholder of Pioneer,” a spokesman for the Tokyo-based firm said, adding that the exact size of the holding would be determined by the end of October.
Pioneer will receive ¥25 billion in a bridge loan on Sept. 18 to help it repay bank loans due this month and which would be later paid back when the stock is issued.
Shares in Pioneer slid 8.5 percent on the planned dilution, giving it a market capitalization of just ¥45 billion.
Baring Private Equity did not respond to a request for comment on its plans for Pioneer.
That valuation represents a marked comedown from its heyday in the 1970s to the 1990s. It introduced the world’s first component car stereo in 1975 and followed that up with car CD players in 1984. In the 1990s, it was the first to bring consumer GPS navigation systems and DVD recorders to the market.
The injection by Baring Private Equity Asia is the latest in a string of deals by foreign equity firms in Japan — a market that has grown as cash-strapped domestic firms seek to offload operations ranging from memory chips to auto components.
In 2014, Baring Private Equity agreed to acquire Pioneer’s home electronics arm with Onkyo Corp., but later withdrew from the deal for undisclosed reasons. In the same year, KKR & Co. Inc. agreed to buy Pioneer’s DJ audio business.